Question

Tina and Bob formed the TB Partnership four years ago. Because they decided the company needed some expertise in multimedia presentations, they offered Kate a one-third interest in partnership capital if she would come to work for the partnership. On August 4 of the current year, the unrestricted partnership interest (fair market value of $25,000) was transferred to Kate. How should Kate treat the receipt of the partnership interest in the current year

Answer 1

Answer:

$25,000 will be an ordinary income(FMV)

Explanation:

Kate received an offer of unrestricted partnership capital interest for the expertise services. so, Kate recognizes it's an "ordinary income"which should be booked at the fair market value of the partnership interest so offered.

i.e $25,000 is ordinary income (FMV)